Ponderosa Fire Dist. v. Coconino Cnty.

• Court: Arizona Court of Appeals
• Writing for the Court: GOULD, Judge.
• Citation: Ponderosa Fire Dist. v. Coconino Cnty., 235 Ariz. 597, 334 P.3d 1256, 694 Ariz. Adv. Rep. 22 (Ariz. App. 2014)
• Decision Date: 28 August 2014
• Docket Number: No. 1 CA–CV 13–0545.,1 CA–CV 13–0545.
• Parties: PONDEROSA FIRE DISTRICT, a political subdivision of the State of Arizona; Utility Source, L.L.C., an Arizona limited liability company; Townhomes at Flagstaff Meadows Homeowners Association, an Arizona non-profit corporation; FLAGSTAFF MEADOWS PROPERTY OWNERS' ASSOCIATION, an Arizona non-profit corporation; THE FLAGSTAFF MEADOWS UNIT 3 HOMEOWNERS ASSOCIATION, an Arizona non-profit corporation; and Bellemont 276 L.L.C., an Arizona limited liability company, Plaintiffs/Appellees, v. COCONINO COUNTY, Arizona, a political subdivision of the State of Arizona; Coconino County Board of Supervisors, the duly elected governing board of Coconino County, Arizona; Coconino County Community Development, a department of Coconino County, Defendants/Appellants.

235 Ariz. 597

334 P.3d 1256

694 Ariz. Adv. Rep. 22

PONDEROSA FIRE DISTRICT, a political subdivision of the State of Arizona; Utility Source, L.L.C., an Arizona limited liability company; Townhomes at Flagstaff Meadows Homeowners Association, an Arizona non-profit corporation; FLAGSTAFF MEADOWS PROPERTY OWNERS' ASSOCIATION, an Arizona non-profit corporation; THE FLAGSTAFF MEADOWS UNIT 3 HOMEOWNERS ASSOCIATION, an Arizona non-profit corporation; and Bellemont 276 L.L.C., an Arizona limited liability company, Plaintiffs/Appellees

v.COCONINO COUNTY, Arizona, a political subdivision of the State of Arizona; Coconino County Board of Supervisors, the duly elected governing board of Coconino County, Arizona; Coconino County Community Development, a department of Coconino County, Defendants/Appellants.

No. 1 CA–CV 13–0545.

Court of Appeals of Arizona, Division 1.

Aug. 28, 2014.

Freeman Huber Law PLLC By Shelton L. Freeman and Matthew J. Mansfield, Flagstaff, Counsel for Plaintiffs/Appellees.

Gammage & Burnham PLC By Cameron C. Artigue and Christopher L. Hering, Phoenix, Counsel for Defendants/Appellants.

Mangum Wall Stoops & Warden PLLC By Michelle D'Andrea, Flagstaff, Counsel for Amicus Curiae City of Flagstaff.

Maricopa County Attorney's Office By Wayne J. Peck, Phoenix, Counsel for Amicus Curiae Maricopa County.

Holloway Odegard & Kelly PC By Ellen M. Van Riper, Phoenix, Counsel for Amicus Curiae League of Arizona Cities and Towns.

Judge ANDREW W. GOULD delivered the opinion of the Court, in which Presiding Judge LAWRENCE F. WINTHROP and Judge MAURICE PORTLEY joined.

OPINION

GOULD, Judge.

¶ 1 We are asked to decide whether Coconino County, Arizona, the Coconino County Board of Supervisors (“Board”), and the Coconino County Community Development Department (collectively “the County”) have the discretion to call performance bonds posted by a developer to ensure completion of subdivision improvements pursuant to Arizona Revised Statute (“A.R.S.”) section 11–821(C) and Coconino County Subdivision Ordinance No. 82–3 (“Ordinance”), section 4.14(A)(2) (May 3, 1982). We hold that A.R.S. § 11–821(C) and Ordinance § 4.14(A)(2) allow the County to exercise discretion in deciding when, and under what circumstances, it may call the performance bonds. Accordingly, we reverse the trial court's judgment.

FACTS AND PROCEDURAL HISTORY

¶ 2 Empire Residential Construction, L.P. (“Empire”) subdivided land and developed Flagstaff Meadows, a residential community, in Coconino County. The subdivision consists of three Units; Units 1 and 2 contain completed single-family homes and townhomes. In 2006, Empire applied to the Coconino County Planning and Zoning Commission to develop Unit 3 into a residential community for single-family homes and multiple-family residences. The Board voted unanimously to approve Empire's application.

¶ 3 On October 17, 2006, the Board issued a resolution approving Empire's proposed Unit 3 preliminary plat, including the requirement that:

In accordance with Section 4.14 of the Subdivision Ordinance, all improvements must be completed prior to submittal of a final plat or a cash deposit, letter of credit, performance bond, or other acceptable financial security shall be required for the costs of any improvements and construction not completed, plus a 10% contingency. This includes, but is not limited to, all roadways, drainage structures, utilities, traffic control signs, street identification signs, fencing, park improvements, pedestrian trails, and landscaping.

Based on the Board's resolution, in October 2007, Empire acquired four subdivision bonds totaling $4,396,241.32. The bonds consisted of $3,364,428.10 for subdivision improvements, $196,998.22 for emergency evacuation route improvements, $660,000.00 for fire station additions, and $174,815.00 for landscaping improvements. The Board approved the final plat in October 2007.

¶ 4 Empire began construction of the subdivision improvements and, upon completion of the emergency evacuation route improvements, the County released the corresponding $196,998.22 bond. However, before it could complete the remaining subdivision improvements, Empire declared bankruptcy and abandoned Unit 3. At the time Empire abandoned Unit 3, the subdivision's infrastructure was not finished; there were no functional internal roads or utilities. In addition, no construction of homes had begun, and no lots had been sold to consumers. The remaining subdivision bonds totaled more than $4 million.

¶ 5 Following a series of trustee's sales, Bellemont 276, L.L.C. (“Bellemont”) eventually purchased Unit 3 in March 2011 with the intent of constructing residences on the subdivided lots and selling them to the public. Bellemont applied to the County for a building permit to begin construction. Bellemont also requested the County call the outstanding Unit 3 subdivision bonds. Over the next several months, the County negotiated with Bellemont regarding the cost of finishing the Unit 3 improvements; during these negotiations, the County also sought to protect itself from the risk of potential litigation costs that might be incurred in calling the bonds.

¶ 6 The negotiations did not produce an agreement and the County ultimately passed a resolution not to call the bonds. In support of this resolution the County found, among other things, that improvements in Unit 3 were “essentially unconstructed,” “there [were] no current residents suffering from lack of infrastructure,” “the public infrastructure covered by the surety bonds is not needed to serve a substantial public interest,” calling the bonds “would primarily benefit only the single current owner of the subdivision property [Bellemont] rather than substantially benefiting the general public or the neighborhood,” and that “litigation is likely to result from a call ... plac[ing] the County general fund at risk.”

¶ 7 Because there was no plan in place to complete the necessary improvements/infrastructure, the County rejected Bellemont's application for a building permit. In response, Bellemont filed a complaint alleging that it had acquired Unit 3 with the expectation the bonds would be called to pay for the remaining improvements and infrastructure. Bellemont requested declaratory relief, a writ of mandamus compelling the County to call the bonds, and monetary damages.

¶ 8 Several parties joined Bellemont as plaintiffs in its complaint, alleging their interests were also harmed by the County's refusal to call the bonds. Townhomes at Flagstaff Meadows Homeowners Association and Flagstaff Meadows Property Owners' Association (“HOAs”), representing the adjacent lot owners of Units 1 and 2, complained about the undeveloped status of Unit 3. The HOA's argued they were being denied the right to live in the “completed subdivision” represented in the public report each resident received when purchasing their property. Ponderosa Fire District (“Ponderosa”) asserted it was denied improvements to its fire station that had been included in the Unit 3 final plat. Utility Source, L.L.C. (“USource”) argued that its investment in the infrastructure of Flagstaff Meadows as a whole could not be sustained without completion and occupation of Unit 3 absent a substantial increase in fees for the property owners in Units 1 and 2.

¶ 9 Appellees requested a hearing for the County to show cause why Appellees were not entitled to declaratory and mandamus relief.¹ At the hearing, Appellees sought a declaration from the court that the County's duty to call the bond was a mandatory, ministerial act, and, based on this declaration, a writ of mandamus compelling the County to call the bonds. Appellees argued the County lacked discretion to refuse to call the bonds for Unit 3. Appellees conceded that the lots were all owned by Bellemont, and none had been sold or committed to individual homeowners. The County responded that it had the discretion to decide whether to call the bonds. The County also objected, on procedural grounds, to any grant of relief at the show cause hearing.

¶ 10 At the conclusion of the hearing, the court granted Appellees' application and ordered the County to (1) adopt a resolution stating the improvements were not finished and (2) send the resolution to the surety. Based on the terms of the surety bonds, this order constituted an order compelling the County to call the bonds.²

¶ 11 Following the hearing, the court issued a writ of mandamus pursuant to A.R.S. § 12–2021, requiring the County to issue a resolution calling the bonds. The County complied, passing a resolution calling the bonds. After the court entered a judgment with Rule 54(b) language, the County filed a timely notice of appeal.

DISCUSSION

¶ 12 The only claims involved in this appeal are Appellees' claims for declaratory and mandamus relief regarding the County's discretion to call the bonds. We are not asked to decide whether Appellees may bring claims for monetary damages based on the County's refusal to call the Unit 3 bonds. Moreover, this case only involves the County's discretion to call the subdivision bonds; it does not address the County's discretion, if any, to discharge, waive, or release the bonds or to use the bond monies for some purpose other than completing the Unit 3 improvements.

I. Standard of Review

¶ 13 We review the construction of statutes and ordinances de novo. State ex rel. Montgomery v. Harris, 234 Ariz. 343, 344, ¶ 8, 322 P.3d 160, 161 (2014) ; Files v. Bernal, 200 Ariz. 64, 66, 22 P.3d 57, 59 (App.2001).

II. Show Cause Hearing

¶ 14 The County argues the order to show cause procedure used by Appellees was improper because it denied it a full and fair opportunity to conduct discovery and present evidence. See Ariz. R. Civ. P. 6(d). However, the County fails to identify what additional discovery or evidence would have been helpful in opposing Appellees' application for declaratory and mandamus relief. Moreover, the issue presented at the show cause hearing involved a pure issue of law...